Mcburger, Inc. wants to redesign its kitchens to improve productivity and qualit
ID: 398023 • Letter: M
Question
Mcburger, Inc. wants to redesign its kitchens to improve productivity and quality. three designs, called designs k1, k2, and k3 are under consideration. no matter which deisgn is used, daily production of sandwiches at a typical mcburger restuarant is for 550 sandwiches. A sandwich costs $1.50 to produce. Non-defective sandwiches sell, on the average, for 2.75$ per sandwich. Defective sandwiches cannot be sold and are scrapped.
The goal is to choose a design that maximizes the expected profit at a typical over a 300-day period. designs k1, k2, and k3 cost $100,000, $140,000, and $140,000 respectively.
Under design K1, there is a .80 chance that 90 out of each 100 sandwiches are non-defective and a .20 chance that 70 out of each 100 sandwiches are non-defective. Under k2 design, there is a .85 chance that 90 out of each 100 sandwiches are non-defective and a .15 chance that 75 out of each 100 sandwiches are non defective. Under design k3, there is a .90 chance that 95 out of each 100 sandwiches are non-defective and a .10 chance that 80 out of each 100 sandwiches are non defective.
The expected profit level of design K1 is $___________
The expected profit level of design K2 is $___________
The expected profit level of design K3 is $___________
It also asks for K2 & K3 as well.
Homework: Chapter 5 Homework HW Seere: 88 30% 17670120 t Problem 5.27Explanation / Answer
Answer: -
Design K1,
80% chance that 90 units out of 100 are non-defective that means 10 units are defective.
20% chance that 70units out of 100 are non-defective that means 30 units are defective
Hence, total defective units are 40 units that are defective which means 60 out of 100 are non-defective.
If 550 burgers are prepared on daily basis 60 units out of 100 units would be productive which is 60%, hence for 550 burgers, non-defective burger would be 60% x 550 = 330 units.
Each unit is sold at $2,75, hence daily sales revenue is 330 x $2.75 = $907.5
For 300-day period, we have total sales revenue to $907.5 x 300 = $272250.
Cost of K1 design is $100000, hence profit of K1 design is $272250 - $100000 = $172250
The expected profit level of design K1 is $172250.
Design K2,
85% chance that 90 units out of 100 are non-defective that means 10 units are defective.
15% chance that 75units out of 100 are non-defective that means 25 units are defective
Hence, total defective units are 35 units that are defective which means 65 out of 100 are non-defective.
If 550 burgers are prepared on daily basis 65 units out of 100 units would be productive which is 65%, hence for 550 burgers, non-defective burger would be 65% x 550 = 357.5 or 357 units (0.5 units would be considered as defective).
Each unit is sold at $2,75, hence daily sales revenue is 357 x $2.75 = $981.75
For 300-day period, we have total sales revenue to $981.75 x 300 = $294525.
Cost of K2 design is $140000, hence profit of K2 design is $294525 - $140000 = $154525
The expected profit level of design K2 is $154525.
Design K3,
90% chance that 95 units out of 100 are non-defective that means 5 units are defective.
10% chance that 80 units out of 100 are non-defective that means 20 units are defective
Hence, total defective units are 25 units that are defective which means 75 out of 100 are non-defective.
If 550 burgers are prepared on daily basis 75 units out of 100 units would be productive which is 75%, hence for 550 burgers, non-defective burger would be 75% x 550 = 412.5 or 412 units (0.5 units would be considered as defective).
Each unit is sold at $2,75, hence daily sales revenue is 412 x $2.75 = $1133
For 300-day period, we have total sales revenue to $1133 x 300 = $3399000.
Cost of K3 design is $140000, hence profit of K3 design is $3399000 - $140000 = $199900
The expected profit level of design K3 is $199900.